Free Research Paper On Cost Accounting

Nike Inc. is a large manufacturing company of equipment, apparel, accessories, and footwear. The company is known as one of the largest suppliers of sports equipment, apparel, and athletic shoes. Nike’s brand is considered highly valuable in the sports business. The major components of Nike’s operations include designing, developing, manufacturing, marketing, and selling its products (Nike, 2014). The company provides employment opportunities to a large number of people all over the world. The global arena provides a larger market for Nike. The company has been able to collect large amounts of revenue due to its quality products that provide satisfaction to the consumers.
Nike operates globally and constantly monitors its factories so as to ensure that the quality of the products is maintained. The company recognizes the importance of its employees, and strives to ensure that the employees play participatory roles in the operations of the company. The employees of Nike are encouraged to develop and bring positive changes in the industry. They are offered a course that encourages them to establish their code of conduct as well as being made aware of their rights. Nike is very concerned about the environment, and ensures that the employees are made aware of the impact of their actions on the environment. The company also organizes a team of workers who are given the responsibility of ensuring that the code of conduct is followed by everyone in the company (Nike, 2014). Audit tools are used to monitor the operations of the factories, and to ensure that accountability is maintained. External bodies are also brought by Nike so as to work with the stakeholders as well as monitor the factories.
The focus of Nike is on identifying the root cause of the company’s problems; evaluation of suppliers; and discovering new methods of defining and sharing responsibilities. An employee is considered a very important tool towards the achievement of the desired results. Nike has put in efforts to ensure that its factory managers respect the employees so as to create an environment that values the employees (Nike, 2014). In return, the employees become motivated, and are happy to work towards the success of the company.
The raw materials used by Nike include leather, rubber, recycled polyester, PVC, phthalates, and organic cotton (Nikebiz, 2014). The type of rubber material that is preferred by Nike is one that is environment-friendly. Nike puts in efforts geared towards protecting the environment. Organic cotton is grown without using chemicals, and it enables the consumers to have good experiences. Nike has increased its use of organic cotton so as to bear responsibility over the environment. Recycled polyester uses less energy, thereby reducing the negative impacts on the environment. Nike is working hard to stop the use of PVC and phthalates in the manufacture of its products (Nikebiz, 2014).
Nike needs standard costing because it is a manufacturing company. The company incurs costs of direct labor, direct material, and manufacturing overheads. The company will have to assign standard costs to items rather than the actual costs. The company will, however, have to pay the actual costs for the materials, and this will result in variances. Variances provide the management with effective tools that aid the decision-making process. A variance is considered as unfavorable if the actual costs are more than the standard costs. Unfavorable variances indicate that if the situation does not change, the actual profits will be lower than the estimated profits (AC, 2015). A variance is considered favorable when the actual costs are lower than the standard costs. Favorable variances indicate that the actual profit will be higher than the estimated profits if the situation does not change. The management at Nike requires standard costing so that they can predict whether the actual profits will go up or down. Such kind of information is important when making future plans for the organization.
Standard costing is important to Nike because it will provide a basis for evaluating performance. The company will be able to measure the degree of its success or failure (AC, 2015). The system provides a means through which Nike can determine its expected profits. Standard costing will enable Nike to set the prices for its products in such a way that the company will make profits. The determination of the variances enables the company to see whether the situation is favorable or unfavorable for their expected profits. The management can then make a decision to increase the prices so that they can achieve the desired profits.
Standard costing is important in financial reporting because it enables the estimation of the cost of opening stock and cost of goods sold (AC, 2015). These entries are important in the determination of the gross profit. Nike can use standard costing so as to simplify the procedures of cost control. Simplified procedures make it easier for the management to understand, and to take any corrective actions that are required. The use of standard costing in financial reporting will enable Nike to become conscious of the costs, and adopt ways that are aimed towards minimization of costs.

Works Cited

Nike. Sustainability. Nike Inc. 2014. Web. 9 Feb. 2015. http://about.nike.com/pages/sustainability
Nikebiz. Environmentally Preferred Materials. Nike Inc. 2014. Web. 9 Feb. 2015. http://www.nikebiz.com/crreport/content/environment/4-2-2-environmentally-preferred-materials.php?cat=product-design
AC. Standard Costing. Accounting Coach. 2015. Web. 9 Feb. 2015. http://www.accountingcoach.com/standard-costing/explanation